Gucci awarded $4.7 million in fashion giants' dispute

United States of America

The decision in Gucci America Inc v Guess? Inc has ended a long-running dispute between the two fashion giants over the use of certain 'G'-related trademarks. In a lengthy opinion reflective of the duration of the battle, Judge Shira Scheindlin of the Southern District of New York found Guess? Inc and certain of its licensees guilty of trademark infringement and dilution and awarded Gucci America Inc profits based on Guess’ (and its licensees’) sales. The court based its findings on the theory of 'post-sale confusion'.

Gucci is a well-known high-end fashion brand established in Italy in 1921. Over the years the GUCCI marks have been applied to luxury goods and fashion accessories ranging from leather goods to clothing, watches and automobiles. Sales of Gucci products are in the billion-dollar range, and the company spends millions of dollars advertising and promoting its products each year. The case focused on five well-known GUCCI trademarks:

  • the green-red-green, three-stripe design;
  • the repeating GG pattern;
  • the stylised G design;
  • the script Gucci logo; and
  • the trade dress consisting of the repeating GG pattern in a diamond motif. 

After reviewing the advertising, promotional and sales information made of record at trial, the court found that Gucci owned protectable trademark interests in all of these marks, and found that the green-red-green design, the repeating GG pattern and the diamond motif trade dress were famous.

Guess is also a well-known clothing and accessory brand. However, as opposed to Gucci’s wealthy target customers and 'aspirational' shoppers (who are younger and less wealthy but who “aspire to the exclusivity that the Gucci brand represents”), the typical Guess consumer is a 15 to 30-year-old brand-conscious young woman who “identifies with the sexy, trendy, flashy image of the Guess brand”. Guess is a “mid-market lifestyle brand, somewhere below ‘haute couture’ fashion houses, but nonetheless above low-end retail discounters like Target or Wal-Mart”. The GUESS marks at issue included:

  • a version of the green-red-green design used by a Guess licensee on shoes;
  • a repeating 'G' pattern (referred to as the 'Quattro G pattern') reminiscent of Gucci’s repeating GG pattern and diamond motif trade dress;
  • a 'square G' design reminiscent of Gucci's stylised G design; and
  • a script Guess logo where the 'tail' of the capital 'G' underlines the word 'Guess'.

Reviewing Guess' marks, the court found that the Guess green-red-green design mark as used on shoes by Guess’s licensee was “intentionally copied from Gucci”, and that Guess’s licensee had acted in bad faith in developing the mark. Moreover, because Guess actively participated in approving the products and designs of its licensees, the court found Guess to be a knowledgeable participant in the licensees’ infringing activities and therefore liable. With respect to Guess’s Quattro G pattern, the court found that, although there was no evidence that Guess had copied the pattern per se, the evidence did show that, in incorporating the pattern into its products, it had acted in bad faith and had intended to copy Gucci’s repeating GG pattern and diamond motif trade dress in an effort to “make the customer happy by giving him or her ‘the feeling of having something designer-ish’”. As a result, the court found Gucci “entitled to a presumption of actual confusion”, and went on to conclude that certain of the Guess products featuring the Quattro G pattern and diamond motif trade dress were infringing (the court noted that other Guess products which used a different background fabric created a commercial impression different from that of the Gucci products and, therefore, were not infringing). 

As to the other accused GUESS marks, the court found that Guess’ use of its square G logo on certain (but not all) products conveyed the same overall commercial impression as Gucci’s stylised G design, and therefore infringed - although the court stopped short of finding that Guess had intentionally copied Gucci’s stylised G design. As to the script Guess logo, after considering the mark and the manner in which it was used, the court concluded that the mark was “decidedly dissimilar” to the script Gucci logo and that, in adopting its script logo, Guess had not copied the Gucci logo nor had it intended to deceive consumers as to the source of products bearing that logo.

With respect to Gucci’s dilution claims, the court noted that, because Guess’ Quattro G pattern and square G design were first used in commerce prior to the 2006 amendment to the Federal Dilution Act, the analysis of whether Guess’ use of those marks amounted to actionable dilution had to be based on the 'actual dilution' standard of the pre-amendment act. In that context, for certain of Guess’s products, the court dismissed Gucci’s claims because it could show no actual dilution. However, the introduction of several other Guess products came after the amendment to the act and, as such, the lower 'likely to cause dilution' standard applied. In those situations (eg, Guess’s use of the Quattro G pattern on products in a manner reminiscent of the Gucci diamond motif trade dress), the court found the Guess use “likely to cause dilution by blurring”. Similarly, products bearing the Guess green-red-green design - a mark which the court had already concluded had been intentionally copied by Guess’ licensee - were found likely to result in dilution by blurring. An important point raised by the court in its analysis of the Guess green-red-green products was that, because the mark was identical to the Gucci green-red-green trademark, a presumption of actual dilution was triggered, which implied a presumption of actual association. 

Turning to the damages aspect of the case, the court explained that, in order for Gucci to obtain actual damages such as lost sales, reasonable royalty or harm to brand value, it would have to show actual consumer confusion or deception. In situations where actual consumer confusion cannot be demonstrated, a trademark owner such a Gucci may obtain monetary relief by proving that the infringer acted with an intent to deceive, because such an intent gives rise to a rebuttable presumption of actual confusion. As to the measure of damages, the court explained that monetary relief in the form of an accounting of the infringer’s profits is available where the trademark owner can establish that the infringer acted with “willful deceptiveness”. An accounting is typically viewed as a proxy for the actual damages suffered by the trademark owner, and functions to disgorge the infringer’s unjustly earned profits or to deter future willful infringement. 

Applying the above principles to the instant case, the court found that Gucci was not entitled to actual damages by way of lost sales or harm to brand value because it provided no credible evidence as to its alleged actual damages on these fronts. The only evidence Gucci did provide on actual damages related to a reasonable royalty calculation; however, the court discounted the expert opinion submitted in support of this calculation and found that Gucci had not met its burden of proof on this issue. The court thus turned to Gucci’s request for an accounting of profits based on Guess’ (and its licensees’) sales of products featuring the infringing marks. Here, the court noted that, for the products for which Gucci had successfully demonstrated infringement, Guess (or its licensees) had intentionally and willfully adopted the infringing marks. As such, the court ordered Guess and its licensees to pay over to Gucci the profits earned on the infringing products amounting to approximately $4.7 million.

Finally, it is worth noting some of the court’s comments on the general issue of post-sale confusion and its relationship to the typical trademark infringement situation where a trademark owner attempts to establish that the accused mark is likely to cause confusion at the point of sale. The court explained that post-sale confusion occurs:

when a potential purchaser, knowing that the public is likely to be confused or deceived by the allegedly infringing product, will choose to purchase that product instead of a genuine one in order to gain the same prestige at a lower price.” 

The court further explained that “the harm that is addressed by post-sale confusion claims is not a misdirected purchase, but a purchase intended to confuse”. In terms of actually establishing a likelihood of confusion in the post-sale context, the trademark owner must show confusion among post-sale observers, as opposed to point-of-purchase shoppers. To assess whether this has been demonstrated, the court explained that, in the Second Circuit, the traditional Polaroid factors are examined, with certain differences. For example, the comparison of the marks is done in a way that takes into account how a post-sale casual observer would typically encounter the marks. Also, because the actionable confusion occurs not at the point of purchase, but as the infringing product is observed post-sale, “the target selling market is of decreased importance” in the likelihood of confusion analysis.  Similarly, post-sale confusion is concerned with confusion among casual observers, who may or may not purchase the product. As such, the level of sophistication and interest of consumers comprising the potentially confused audience may be different from that of consumers actually looking to make a purchase. 

Timothy J Kelly, Fitzpatrick Cella Harper & Scinto, New York

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